Confronting greater media scrutiny and an ever-increasing number of shareholder resolutions focusing on executive pay, Corporate America continues to support current pay practices as a product of "the market." Not too long ago, former Treasury Secretary John Snow defended the dramatic rise of executive pay over time as a product of efficient markets and argued that the increase merely reflects the growing marginal productivity of chief executives.
Unfortunately, this standard defense reflects a broad misconception of both the CEO market and the nature of public concerns about executive pay. The idea that CEO compensation is driven by the invisible hand of market forces is a myth from which chief executives have long benefited.
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